JPMorgan Chase’s recent agreement with three New York City pension funds signifies a significant step towards greater transparency and accountability in financing practices related to clean energy and fossil fuels. The agreement, valued at $478 million, entails the disclosure of the bank’s clean energy to fossil fuel financing ratio, providing investors with a clearer understanding of its progress towards achieving net-zero emissions goals.
The NYC pension funds, managing a combined $193 billion in assets, initiated this move to push major banks to offer more comprehensive data on their climate transition commitments. JPMorgan’s settlement, making it the first among six major banks to strike such a deal, resulted in the withdrawal of the shareholder proposal previously lodged against these banks. While other banks like Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, and Royal Bank of Canada still have pending proposals, the NYC Comptroller’s office continues engagement with them.
Research from Bloomberg New Energy Finance underscores the urgency of transitioning to low-carbon energy sources to limit global temperature increases. The optimal ratio of investments in low-carbon energy to fossil fuels needs to reach at least 4 to 1 by 2030 to keep temperature rises below 1.5 degrees Celsius. JPMorgan’s estimated ratio of 0.7, compared to the 0.8 found in Bloomberg’s 2021 research, highlights the need for accelerated efforts in clean energy financing to meet climate targets.
JPMorgan Chase’s recent agreement with New York City pension funds to disclose a clean energy financing ratio represents a step towards greater transparency in its transition to a low-carbon economy. However, the bank acknowledges the complexity of developing a useful approach for disclosing this metric and emphasizes the need for time and resources to ensure accuracy and clarity.
Despite JPMorgan’s $1 trillion target for financing initiatives supporting the transition to a low-carbon economy, the NYC funds highlighted its significant financing of fossil fuels, totaling $434 billion since 2016. This discrepancy raises questions about the bank’s commitment to achieving net-zero emissions by 2050.
The move comes amidst criticism of asset management firms like J.P. Morgan Asset Management and State Street for withdrawing from the Climate Action 100+ coalition. These firms cited a shift in focus towards clearer disclosure and away from specific action as a reason for their departure. However, this shift coincides with a broader movement against ESG initiatives, with some conservative groups and politicians accusing financial services firms of prioritizing social issues over financial returns.
Despite these challenges, investor focus on climate change remains strong, with a record number of environmental and social-related shareholder proposals filed at public companies in 2023. Climate change-related issues are expected to continue driving shareholder engagement, with some investors pushing financial services firms to align client emissions with net-zero targets for 2030.